Brazil's energy powers economy

With the focus on the presidential campaign, you may have missed the news that California is no longer the world’s eighth largest economy. Brazil, whose president, Dilma Rouseff is in Washington this week, recently leapfrogged the Golden State in terms of economic size, according to the Center for Continuing Study of the California Economy.

Many factors affect economic growth, but the vast difference in Brazil and California’s energy policy and how they use their natural resources – both have rich oil reserves off their long coastlines — provides the quintessential example of how California’s anti-growth policies have accelerated its slide and Brazil’s ascent in global economic rankings.

Story Continued Below

Despite California’s 10.9 percent unemployment rate and perennial deficits, Gov. Jerry Brown and the Democratic lawmakers who control the state legislature refuse to consider tapping the state’s vast offshore oil and natural gas reserves. Continuing this foolish prohibition will likely cause the state to forgo 26,333 additional jobs by 2015, and more than 86,000 additional jobs by 2020, according to a 2011 Wood MacKenzie study.

Sacramento’s Democratic legislative majorities are beholden to influential environmental groups which help keep in place policies that prevent not just job creation, which the California economy desperately needs, but well-paying jobs. That’s why the average salary in California is $52,553, but the average salary for non-gas station oil & natural gas employees is north of $116,000. It’s those high-paying jobs that would increase if the policy changes.

Brown’s top focus for the past two years has been passing a ballot initiative that would raise taxes. He is championing a November ballot measure that would increase California’s already highest-in-the-nation sales tax, and make the state’s top marginal income tax rate the highest in the country. Yet by permitting the use of offshore energy resources that are now off limits, the state could take in more than $11 billion in new revenue over the next two decades.

As a result of anti-growth energy policies, California’s oil production has steadily dropped since the mid-1980s, from more than 400 million barrels per year in the mid-1980s to less than 200 million in 2011. In stark contrast, Brazil has moved to fully use its recent offshore oil discoveries, the largest found in the Americas in more than 30 years.